Security Bank Corporation v. Court of Appeals

Summary

Security Bank Corporation was held liable for P2,000,000.00 plus interest for improperly crediting a crossed manager's check payable to 'Wondertex Finishing' to an account named 'Edrick's Marketing.' The Supreme Court affirmed lower courts' findings that the bank violated basic banking procedures by failing to verify that the depositor was authorized to deposit checks for the named payee. The case establishes that collecting banks have a duty of diligence to scrutinize crossed checks and ensure deposit to the correct payee's account. The Court applied quasi-delict provisions of the Civil Code, holding banks to high standards of conduct given their expertise in banking. The decision reinforces that crossed checks marked 'For Payee's Account Only' create strict obligations for proper crediting, and bank negligence in this regard results in conversion liability to the rightful owner.